Arsenal America Is Both Police and Merchant

ByJoanne Omang

July 8, 1983

Turkey's armed forces are so outdated, Assistant Defense Secretary Richard N. Perle told two congressional committees, that he would reveal details about them only in closed session so as not to give too much joy to the Soviet Union.

A Senate staff member present at Perle's ensuing private slide show called it "theatrics," for Turkey's problems are common in much of the world: most of its planes were built in the early 1960s, and virtually nothing else is newer than mid-Korean War. A 1978 parade included horse-drawn artillery.

For countries in this predicament, Uncle Sam runs something like a bang-bang bargain basement. Not only does he offer top-notch new and used machines at competitive prices with loads of options, he will also police the salesmen for the buyers and even provide part of the money to pay for the deal.

This means that the Turks, like other diplomats here, spend a lot of time browsing in military catalogues. They plan to spend about $4 billion over the next seven years on 160 new jet airplanes and, if they play their cards right, Uncle Sam will not only assist in buying the planes but also throw in help for marketing Turkish wine and silk, leather skirts from Istanbul and chrome, buses and refrigerators from Anatolia.

That is the newest wrinkle in the sales pitch, one Perle did not mention to the committees. It involves contract sweeteners called "offsets," an established part of the high-jargon international arms market.

In an offset deal, the arms manufacturer promises to help the customer sell a certain number of dollars' worth of distinctly non-military items, such as wine and refrigerators, abroad. These sales bring in money to help offset the cost of the planes by that amount.

Such sales services are nominally free, but in truth, "it's all included in the overhead, of course," as one company executive put it, meaning it is buried in the price of the plane. That means that, if Uncle Sam pays part of the arms tab, as he will for 30 nations next year, taxpayers' money is buying wine-brokering as well as guns.

Putting an arms deal together is high diplomatic art. The process begins years in advance of formal talks, as manufacturers keep book on which nation's weapons are becoming obsolete and talk privately with officials worldwide on estimations of future needs.

The needs, apparently, are huge: competing aircraft company executives agreed that the world market will absorb about 2,500 advanced jet fighters over the next decade. The State Department's Office of Munitions Control approves about 40,000 arms licenses a year, mostly for showing or selling unclassified hardware and spare parts, according to a munitions office spokesman.

The Foreign Assistance Act report for 1980, the last one issued, shows $1.9 billion in U.S. commercial arms exports were licensed that year, while government-to-government deliveries totaled $7.7 billion.

Turkish diplomats consulted with the Defense Department beginning in February 1982 on what Turkey might most easily buy. There are limits.

In the Turks' case, as with all NATO allies, State and Defense department watchdogs had no objection to their checking out the very latest models with the fanciest electronic equipment, as long as the gadgets are made in this country.

Advanced equipment cannot even be shown to certain nations, including most Latin American countries, which can buy other, less secret items. Some nations, such as Argentina and Chile, may not buy arms. Only nine countries have been allowed to buy General Dynamics' F16 fighter-bomber, and three have McDonnell Douglas' F18 fighter-bomber. Turkey is considering both planes.

Defense and State department officials try to help the Turks figure out what aid they might expect from Congress and, therefore, what they can afford. Aid never covers everything, so the Turks must consider where additional millions might be found at home or elsewhere.

Every spring, according to a State Department official, desk officers compile embassies' aid requests into "a wish list for the world" two years into the future.

Defense, the White House and the Treasury weigh in with current U.S. political, trade and military hopes, "and normally you get into a big internal argument over whether the country can support the armament it wants," a Defense official said. "You also have to consider that, if the Greeks get something, we'd better be prepared to sell it to the Turks, too, and vice versa."

Turkish diplomats here were briefed by Perle last October on the merits of planes their government was considering and problems each might cause. Perle reportedly also urged the Turks to consider Northrop's new F20 fighter. Competitors said Perle has owed Northrop a favor since, after objections by the People's Republic of China, the Reagan administration canceled a pending Northrop deal with Taiwan.

By validating the companies' offers, the Defense Department in effect guarantees that the Turks will get what they pay for. A nation pays Uncle Sam a 3 percent service charge for such help every time a buy goes through the Foreign Military Sales program.

A country may, if it chooses, waive the advice and avoid the 3 percent fee by paying cash directly to the manufacturers for non-restricted items, but then none of the money comes from Congress.

Engineers from Northrop, McDonnell Douglas and General Dynamics went to Turkey to talk directly with Turkish engineers about maintenance and spare-parts needs. Turkish pilots came to the United States to "kick the tires," as one executive said, and test-fly all of the jets. Corporate presidents flew to Ankara to sweet-talk the defense minister in person.

The companies are so eager to land the sale that they are offering very tempting offset packages. These reportedly would teach the Turks to assemble the planes themselves in Turkey, to find buyers for more than $1 billion in Turkish products and/or help establish mining and communications companies and teach the Turks the necessary technology.

The offset services vary according to each company's talent. Northrop representatives are scouring Turkey for marketable products and services and have compiled a "yellow pages" of available items.

Northrop pioneered this kind of sales technique in a 1970s pact, thought to have been the first of its kind, in which it sold 72 F5E jets to Switzerland for $450 million. It found markets in other countries for $136 million in Swiss chocolate, knives, watches and other products, and contends that its service preserves U.S. jobs by selling the goods in third countries instead of in competition with U.S products here.

McDonnell Douglas, making a more personal commitment, has sold tons of Yugoslavian hams to its employes in company cafeterias and has offered Canadian ski trips to its 80,000 workers as part of arms deals with those countries. General Dynamics proposed a titanium-processing facility for Australia with Pratt & Whitney, but did not get the nod.

Turkey has hinted it may choose whichever firm lets it build the most airplane parts soonest, because the Turks hope to have an infant airplane industry by 2000 and eventually to export planes.

"It depends on where we get the best offer," Air Force attache Brig. Gen. Uluer Eceral said. Like all parties to this deal, he is close-mouthed on details of offers as talks continue, but other sources indicated that the outcome may involve a combination of at least two types of planes.

In an example of the politics involved, first the Turks and then, two days later, the Greeks received new tank armaments earlier this month. The foreign-aid process also was the main preoccupation of the Turkish Embassy most of this spring.

Perle told Congress in March that NATO security, Soviet hankering after Persian Gulf oil and the revolution in Iran meant that U.S. military aid to the Turks should double to about $1 billion, which would allow them to start buying airplanes.

The Greeks, through their friends in Congress, objected that this would upset the existing military balance in the eastern Mediterranean and tempt the Turks in Cyprus, where their army pushed Greek residents out of the northern third of the country in 1974. Noting that their own U.S. aid would not be increased until they agreed to extend permits for U.S. bases in Greece, the Greeks claimed blackmail.

The debate has wound through four months of hearings, arm-twisting and delicate fiscal surgery, and has been a defeat of sorts for the Turks and the Reagan administration. Bills in the House and Senate would lower the proposed increase for Turkey slightly and nearly double aid to Greece to maintain the existing military balance. The House bill also would "express the concern in Congress" about continued stalemate in Cyprus.

For the Turks, the painful part, unlikely to be changed in floor votes expected this month, is that most of the aid to both countries is in loan guarantees, not grants. Turkey will have to struggle mightily to raise enough cash to begin buying planes it wants.

But the Turks are philosophical. "It's your money," said Yalem Eralp, deputy chief of the Turkish mission.